jump to navigation

Halting Home Construction Key to Recovery, Warren Buffett Confirms July 14, 2009

Posted by John Watch in AccuriZ Reports, News Feed.
Tags: , , , , , , , , ,
trackback

Excerpts from CNBC.COM

Warren Buffett confirms what few analyst have been reporting; home construction spearheaded the recession and halting it is the first step to recovery.

“There is no silver bullet,” Buffett adds. “The original cause of this was the housing bubble… we built a couple million housing units a year… surprise we had too many houses.. you can’t work that off in a day, week or month. The best thing we can do is not to be building a lot of new houses.”

Months ago, the Housing in Crisis report produced by AccuriZ indicated the impact of home construction on the economic crisis.

Public records show that from 2000 to 2008, 15.1 million homes were constructed. When the property data is weighted against natural population growth – even including the influx of illegal immigrants – there was a substantial amount of excess housing. Given the average household size, the population would have had to increase by 40 million since 2000 to absorb the housing. In actuality, it has only increased 25 million, well short of lofty housing expectations. At the end of 2008, 5 million homes were unoccupied. With rising foreclosures and banks holding onto more properties soon to be foreclosed, total absorption of home construction would take over a year.

[“There is no silver bullet,” Buffett adds. “The original cause of this was the housing bubble… we built a couple million housing units a year… surprise we had too many houses.. you can’t work that off in a day, week or month. The best thing we can do is not to be building a lot of new houses.”]

But rising numbers in building permit applications and home construction threaten this statistic. The same process of oversupply that Buffet says initiated the crisis is being permitted to continue. If any significant signs of recovery are to occur, home construction must remain at its natural cycle of 500,000 to 600,000 homes a year until the absoprtion of the excess is completed. Hopefully now that Buffett has reiterated this point, people become aware of the problem that lies ahead. The welfare of an entire population should not be sacrificed for the benefit of a few.

“That’s tough on the homebuilders but that’s the prescription for getting supply and demand back in balance,” Buffett says. 

Bookmark and Share

Advertisements

Comments»

1. Cyclical, Seasonal, or Emotional: Where is the Real Estate Market Today? « AccuriZ - July 31, 2009

[…] Expectations of Baby Boomer migration and new homeowner growth fueled this development.  The existing oversupply issue will take at least two, if not three more years to be absorbed and new housing starts will remain […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: